Viewpoint

National Health Care: How Small Business Will Fare

As the debate about health care continues, I find myself thinking about other countries with national health plans and worrying that we're going to become like them. On the one hand maybe we can be as sleek and efficient as the Swedes. On the other hand I fear suffering from blackened teeth and a pasty complexion like the Brits. Or worse, just sinking into obscurity like the Canadians. Maybe my worries are groundless. Oh, and for the record, my wife is a Brit. And she's never even had a cavity. What an oddball.
As I write this, a huge national health bill is being debated in Congress. The President is trying to push through his plan. Other, competing proposals are on the table. And although many of the details are still up in the air, one thing's for sure: the new plan, whatever it will entail, will need to be funded. And unlike the Brits, that money won't come from the savings from never seeing a dentist. In this country, the funding is likely going to come from a "pay or play" option. And that option will be forced on businesses, both big and small.
There are four leading proposals being discussed. One, proposed by the President, would enact an 8% payroll tax for employers that are not providing or paying enough health insurance for their employees. Another, proposed by Senator Kennedy, would levy a $750 per employee annual charge for those same employers. The third sits in the Senate Finance Committee—this doesn't include any pay or play provision. That won't happen. The fourth involves an invasion and takeover of Canada, but that one's losing ground because no one wants to go to Canada.
Small business owners hate the idea of more taxes, almost as much as we hate being called small business owners. We're being told that this new tax will help pay for health coverage for all and that in the end it will benefit us as a country.
LOWER INSURANCE COSTSWill national health care benefit us as a country? I'm not really sure. But one thing I know for sure: British food is terrible. And a national health insurance system would be a good thing for small business owners. Not a bad thing. Now before my fellow conservatives handcuff me to a TV and force me to watch 20 hours of The Franken & Davis Show, let me explain.
For one, as a business owner, a national insurance plan would be cheaper for me. Way cheaper. Yes, those critics are probably right—socialized medicine will probably lead to higher individual taxes, longer wait times for treatment, lower-quality health care, and a strong urge to have tea and biscuits at 4 o'clock. But take a look at these numbers from a client of mine—a 50-person manufacturer in Pennsylvania. In 2008 it paid $375,000 net health insurance on a payroll totaling $2.086 million. (This included the owners.) And this is for a pretty basic Blue Cross plan. That works out to 18% of its payroll cost. If we go with the President's 8% plan, the company would save about $208,000. If we opt for Kennedy's proposal, it would save $337,500 per year!
Would this be better for our employees? Maybe yes, maybe no. But at least it's something. A lot of employers are providing nothing. Some employers may be offering and paying too much. Will we all opt for this option? Maybe yes, maybe no. Some of us may want to offer better plans to our employees to gain a competitive edge or because we place a higher value on this kind of employee benefit. With a national health plan, business owners would be given a much less expensive health care option to provide to their employees. Right now we're stuck paying insurance premiums to the Big Blues and the HMOs that seem to be nonnegotiable and fixed in some smoky backroom in the Bronx. Having a lower cost alternative gives us some breathing room. And some choice.
And if we choose the lower cost alternative, what are we going to do with these savings? Sure, my client could take the entire amount and purchase two tickets to an Arsenal vs. Chelsea match (ever seen how much those tickets cost?). But more likely it'll reinvest. It may actually hire more employees. Or spend on a piece of equipment. Or keep a few more cans of warm lager in the employee lunchroom.
ELIMINATING UNWELCOME SURPRISESAnother benefit? Less surprises. There are two things I personally dread receiving in the mail: my oldest son's report card and our health insurance premium notice. Thankfully I can kick my son out on the street once he (hopefully) graduates high school. But I don't have this kind of option for my health insurance costs. This is a huge, annual wild card for business owners. What will the increase be this year? Only 27%? Phew, what a relief! The pay or play plans being discussed would levy a fixed percentage or amount on business owners based on payroll dollars or headcount. Like it or not, you can't deny that at the very least, there would be no surprises. Knowing what the cost will be every year makes it easier to budget, easier to set prices, and easier to plan hiring. Right now the expense is so variable, and so significant, that it has an impact on our decisionmaking.
A lot of people are saying a national health plan would deincentivize us from providing wellness benefits. You know what these are, right? They're things like fitness club memberships, nutritional food choices, and other programs to make employees healthier that in turn would decrease our overall insurance costs. Nice idea in theory, especially if you're a Fortune 1000 company that can afford human resources departments and internal wellness czars. But exactly how many business owners are actually doing this? We're just happy if our people show up in one piece. Few of us are buying into the theory that cutting back on those Reese's Pieces on the receptionist's desk and having our six employees walk around the parking lot once a week will actually have an impact on our health insurance costs. I'm happy to take my chances on this.
And you know what? Maybe a little competition wouldn't be so bad for the health insurance providers either. For years it seems like we have had to take whatever increase they've invoked in order to keep their profits steady and their shareholders happy. Now, with a lower-cost government plan in place, perhaps these same companies will need to sing and dance a little more to get our attention. Perhaps they may actually find a way to decrease their prices or increase their services in order to entice us to stay on board with them. This can only benefit our employees, not to mention our own bottom line.
What about employers that don't provide insurance but will be required to? Some of the plans are proposing to exempt companies with less than 25 people from this rule. So what if you're employing more than 25 human beings and you're not offering these people any insurance? Check your calendar, dude—we're not in Victorian England. Maybe you should. And if that means forking out $750 per person to do this, then boo hoo.
So yeah…maybe those Swedes and Brits and, darn it, even the Canadians are on to something. Sure, there are a ton of very reasonable downsides to a national health plan. Our overall level of care may deteriorate. Our personal taxes may go up. Our teeth may turn brown and crooked. Our best doctors may lose the incentive to do their best work. We may all be forced to drink warm beer. But then again, maybe our tabloids will start showing a topless beauty on Page 3. Oh, and maybe some business owners will have a more affordable health care option that they never had before.

Gene Marks, CPA, is the owner of the Marks Group, which sells customer relationship, service, and financial management tools to small and midsize businesses. Marks is the author of four best-selling small business books and writes the popular "Penny Pincher's Almanac" syndicated column. He frequently speaks to business groups on penny-pinching topics. More penny-pinching advice from Marks can be found at www.quickerbetterwiser.com.